Feb 2, 2023
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Cristina Betts bullish for Iguatemi, explains the Brazilian giant’s future M&A roadmap

Feb 2, 2023

This past week in Paris, Brazil’s most important luxury retailer Iguatemi feted its rebound from the pandemic, as its CEO Cristina Betts predicted double continued digit growth in 2023.

Cristina Betts - DR

Brazil suffered the triple whammy of the slow shake-off of covid, a highly tense presidential election and declining global stock markets last year, but Iguatemi still scored low double digit-growth in 2022.
The group owns a total of 16 prestige and polished malls, notably two key ones in São Paulo and another in Brasilia where major league Western brands congregate. Louis Vuitton has four stores with Iguatemi, while Dolce & Gabbana has five with the prestige products retailer.

All told, its flagship Iguatemi has a whopping 700,000 square meters of rental space, or Gross Leasable Area (GRA) a massive footprint even in a country as large as Brazil.
When Betts was made CEO in 2021, she became effectively the single most important luxury executive in Latin America, the latest step in a career that began after completing a masters in Paris business school Insead.
Her appointment was part of a major restructuring which saw the parent company of Iguatemi collapse into the operating company, though always leaving the founding Jereissati family in control. The family now has the majority of preferred shares and voting rights and a stake of 30% in ordinary shares.
Betts succeeded Carlos Jereissati, who became chairman of the new company.
With the pandemic in retreat, Carlos recently celebrated Cristina’s ascension with a dinner in famed fashion restaurant Voltaire. The attendance underlined Iguatemi’s throw-weight: Christian Louboutin, Cédric Charbit CEO of Balenciaga, Jean Cassegrain CEO of Longchamp, Roland Herlory CEO of Vilebrequin and Sonia Rykiel, and Georgina Brandolini, the legendary Paris mover and shaker who represents Iguatemi in Europe.
So, we sat down with Betts to better understand Iguatemi’s individual business model and plans for the future, which are very much focused on M&A.
“Over the past 10 or 15 years, our growth came from building, actual new malls in new cities. We will continue that, and we will expand and build out Brasilia. But a lot of our growth in the next decade will come from M&A. If you look at only the high-end luxury market in Brazil, the top 10 high-end players don’t even control 50% of the revenue pool. It’s still an incredibly pulverized market. There are lots of different ownership structures. Many malls are owned by half a dozen partners. So, we believe there are a lot of individual stakes you can buy,” stressed Betts.
“In 2021 we decided to go through a corporate restructure, though we wanted the family to continue to be majority shareholders. We moved from one to two classes of shares. And, we have a new governance structure giving certain veto rights to minority shareholders. We moved the family onto the board level, as Carlos became chairman, and I became CEO. Everyone below is professional. This allows us to finance acquisitions, without immediately diluting the family’s control. We think that is highly valuable, as they are very knowledgeable about this business, and passionate too. But also, because having the company transition into professional management, ensures continuity,” Betts explained.

Carlos Jereissati Filho and Christian Louboutin at the event - DR

Iguatemi was first listed back in 2007 and has been a pretty consistently profitable company ever since. Today, after a battering on world stock markets, including Brazil’s, its market capitalization is 5.74 billion reals, about 1.1 billion euros, down over 50% from its highest price.

In its most recent financial year, EBITDA was some 750 million reals, on annual sales of 1.2 billion euros. Remarkably, its turnover is almost the same as its market cap, suggesting Iguatemi stock might be a very good buy.
“The stock market is incredibly depressed right now, so our market cap does not reflect are real worth. I keep saying to our investors, if you don’t buy our stock now, you will regret it later," she laughs.
Iguatemi is a full-service mall company, which designs, builds out and manages its own malls. It caters to the middle to high end in Brazil, mainly focused on the south and southeast of the country, with one exception Brasilia. Iguatemi manages the leases, contracts and day to day operations of its malls, some of them built with apartment complexes around them. Historically, it has built with excess capacity, gradually adding residential units, offices and hotels.
“Malls take time to mature. It is a habit thing. We used to say five years at least. People need to know the mall and what to expect,” underlines Betts.
Currently, 90% of their GRA is occupied, an impressive ratio. “But we have space to build out another million square meters in GRA, so we could double the company in size,” the CEO stresses.
Like classical luxury malls in the west, Iguatemi leases spaces with a guaranteed minimum rent and a percentage of sales rent. “And, of course, if they don’t make the turnover they pay the minimum,” she notes.
Average rate per square meter monthly rates vary enormously in Brazil, but Iguatemi is very much at the top end, often between 800 or 1,000 reals per month.
Their flagship mall is Iguatemi in São Paulo, while in the same city they also have JK, named after a nearby avenue JK Kubitschek, the president who built Brasilia. Like all their malls, it is swish, safe and quietly bustling, with chic restaurants and cinemas built over extensive underground parking.
“JK opened 10 years ago and has done so well. We have no more space on the ground floor for the luxury brands,” she enthuses.
Despite the recent attempted coup in Brasilia, business is steady; and Betts is expecting low double-digit growth in 2023. That said, Brazil remains a tricky market for foreign luxury labels, due to taxation and security among other concerns.
“It’s complicated to operate in Brazil. It is in the southern hemisphere, and there are import duties from 30% to 50%. That is on the cost side on arrival, but it’s quite heavy,” she muses.
They have a small retail business incubator called iRetail to encourage brands into Brazil, while companies often vary their relationships with Iguatemi over time.
“Our set ups can vary from franchisee to a JV, before a brand then takes over and it becomes their own business. Louboutin, for example, began as a JV then took over and then went back to being a franchise. Or the Balenciaga franchise, they are about to take it back as it has been so successful. They are opening their second store this year in Brazil!” she notes.
Global brands like Sephora and Zara “have done amazingly well but The Gap did not work. Their local operator didn’t work, and his own brands went bust too,” she laments.

Iguatemi Sao Paulo - DR

Three-quarters British and one quarter Brazilian, Betts grew up in São Paulo though speaks English with a home counties accent. After Insead, Betts qualified as an accountant, then worked in investment banking before becoming an airline executive.
By 2008 she was invited to join Iguatemi, wondering “do they really want to hire me? But I loved the challenge of malls and luxury. It was one of my best decisions. Every day has a new challenge,” she notes.
She ended up being CFO for 14 years before becoming CEO last year. Asked whom she sees as her main competitor, she responds: “Maybe no one, as we have the most malls that carry luxury brands. In terms of the whole portfolio, another group called Multiplan – they are middle to high end.”
Fashion editors visiting Brazil have long noticed the rivalry between the Auriemo clan, which owns the stylish Cidade Jardim mall in São Paulo, and Fassano, Brazil’s hippest hotel chain.
But when quizzed about Auriemo, she sniffs: “Yes, they have one nice mall, but they have only one. He is more a developer, who builds the hotel, the mall or the weekend house. We are retail at our core,” she stresses.

Another trend supporting mall growth in Brazil, is the decline of high-end shopping streets, like the famed Rua Oscar Freire in São Paulo.
“Yes, Vuitton had a store there, but most of the luxury brands fled. The problem with being on the street is you don’t know who your neighbors are going to be. So, you can end up having Topshop next to Vuitton, which isn’t going to work. Whereas in our malls, we co-ordinate brands together very closely,” she points out.
“We have every major luxury brand with us, but with one exception, Dior, as we never seem able to find the right space,” says Betts, before adding that some of the best performing marques have been Tiffany and Cartier.
“Tiffany’s transition to gold is clearly working. They are a massive brand in Brazil, and they have these new lock bracelets. They are very beautiful and are instantly recognizable,” notes Betts.
In remarks in Voltaire, looking back over her time at Iguatemi, Jereissati would muse: “When I started more than 20 years ago, this industry was a promise. Today it is consolidated and growing and thriving. You all bet on Brazil back then, and I thank you for that. Cristina has been doing a great job for 15 years. She knows so much about business, and we are very grateful to have her running things.”
In response, Betts noted: “When I joined, we had eight malls. We have doubled that number. We had a handful of luxury stores, now we have over 140. And our EBITDA is tenfold greater. So, I’d like to thank Carlos, who taught me all about this business and installed in me his passion for our company and this world. I have been here for 15 years and as I like to say to Carlos, there are couples who don’t stay together for so long!”

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